Three studies provide convergent evidence that the inverse base-rate effect (Medin & Edelson, 1988) is mediated by rule-based cognitive processes. Experiment 1 shows that, in contrast to adults, prior to the formal operational stage most children do not exhibit the inverse base-rate effect. Experiments 2 and 3 demonstrate that an adult sample is a mix of participants relying on associative processes who categorize according to the base-rate and participants relying on rule-based processes who exhibit a strong inverse base-rate effect. The distribution of the effect is bimodal, and removing participants independently classified as prone to rule-based processing effectively eliminates the inverse base-rate effect. The implications for current explanations of the inverse base-rate effect are discussed.